Baht pares back best start since 2008

Thailand's baht fell, paring its best weekly start to a year since 2008, after minutes of a United States Federal Reserve meeting indicated the monetary authority will probably end its bond-buying program in 2013.

Fed members were divided between a mid- or end-of-year finish to the debt purchases, according to the minutes of last month's meeting that were released on Thursday in Washington. The baht touched a 10-month high on Thursday as foreign funds bought US$36 million more local stocks than they sold this week, exchange data show.

"The Fed minutes determined the baht movement and gave some support to the dollar in other Asian markets as well," said Kozo Hasegawa, a foreign-exchange trader in Bangkok at Sumitomo Mitsui Banking Corp. "Funds will continue to pour into Thailand and I don’t think this trend will reverse too soon."

The baht dropped 0.2% to 30.43 per dollar as of 9.27am in Bangkok, according to data compiled by Bloomberg. It has appreciated 0.6% from Dec 28, the most in the first full week of the year since 2008. The currency touched the high of 30.29 on Thursday.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose five basis points to 4.08%, the highest level since Dec 17. It climbed 17 basis points, or 0.17 percentage point, for the week.

Government bonds declined this week as official data released Jan 2 showed inflation accelerated to a 13-month high of 3.6% in December. The Bank of Thailand will keep its benchmark interest rate at 2.75% at its Jan 9 meeting, according to all nine economists surveyed by Bloomberg.

The yield on the 3.875% notes due June 2019 rose nine basis points to 3.32% from a week ago, according to data compiled by Bloomberg. The yield advanced three basis points on Friday.

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Writer: Bloomberg News
Position: News agency